Google emerges from FTC antitrust probe largely unscathed

On Jan. 3,the Federal Trade Commission (FTC) announced the culmination of its antitrust investigation into three facets of Google Inc.’s business practices: online advertising, patents and search algorithms. The 19-month investigation was lengthy and extensive—the FTC held several hearings with Google executives, conducted empirical analyses of Google’s methods and examined more than 9 million pages of documents.

Google will have to make some changes, but overall the investigation landed on its side. On Google’s official blog, Chief Legal Officer David Drummond essentially declared victory: “The conclusion is clear: Google’s services are good for users and good for competition.”

The Google-FTC deal has its share of critics. The media has widely characterized the investigation’s outcome as a mere slap on the wrist for Google. Microsoft Corp., which had urged the FTC to take action against Google, called the resolution “weak and—frankly—unusual” on its public policy blog.

In an informal commitment letter, Google agreed to make voluntary changes to its online advertising practices. As for its patent practices, Google settled with the FTC by agreeing to a consent order (see “Bright Line”).

The most clear-cut win for Google came in the FTC’s unanimous decision not to take action against the company for its alleged manipulation of search results.

Cooperative Approach

Competitors had complained to the FTC that Google hurt competition by giving its own properties preferred placement on search results pages while demoting competitors’ content. The FTC concluded after its investigation that such practices had a legitimate business justification—namely, improving the overall quality of Google’s search product—and voted 5-0 to close the investigation.

“Undoubtedly, Google took aggressive actions to gain advantage over rival search providers. However … the evidence collected to date did not justify legal action by the Commission,” Beth Wilkinson said in an FTC press release. Wilkinson, a partner at Paul Weiss, was brought in to lead the FTC investigation.

A source with knowledge of the investigation said that Google bent over backwards to avoid the adversarial stance Microsoft had in its own antitrust battles. (Much ink was spilled over footage of Bill Gates’ infamously curt demeanor in a 1998 deposition.)

Instead, Google treated the investigation as an opportunity to rebut the allegations of its adversaries and to make sure the FTC understood not only the complexity of the subject matter under investigation, but also the company’s historical reasons for taking the actions it did.

In the end, it appears the evidence fell in Google’s favor, but it had to have helped that the key facts of the case were presented to the FTC from Google’s viewpoint and in the context of Google’s metrics.

Rather than simply play defense and take an overly adversarial approach designed to support an argument that the FTC simply could not establish certain facts, Google appears to have made a conscious decision to engage the FTC in a forthright and open manner to make sure that the agency was not confused about complex factual or technological issues that Google believed supported its defenses in the case.

Voluntary Measures

It’s notable that Google resolved the investigation into some of its advertising practices, which the FTC found were cause for “strong concerns,” by voluntarily committing to refrain from such conduct.

Namely, the FTC was concerned that Google placed unreasonable restrictions on advertisers’ ability to advertise both on Google and competing search engines, and that it engaged in “scraping,” or misappropriating competitors’ content and passing it off as its own and threatening to delist the competitors if they complained. In an informal commitment letter, Google said it would refrain from such conduct in the future and provide the FTC with updates on its compliance, and then-Chairman Jon Leibowitz and Commissioner Julie Brill said the commission would vigorously enforce Google’s commitments.

Closing its investigation with such an informal commitment was a departure from the FTC’s usual practice of requiring a formal consent decree to correct behavior the commission finds questionable.

“I’d be surprised if this becomes a new standard way of doing business,” says Jonathan Gleklen, a partner at Arnold & Porter.

Commitment Objection

Supporting that view is the fact that the FTC’s new chairman, Edith Ramirez, a commissioner during the Google investigation, doesn’t seem to support the measure. A footnote in the FTC statement on the Google investigation states that though Ramirez “is pleased that Google has decided to change certain of its practices, she objects to the form of commitments made by Google.”

Gleklen also notes that Google’s voluntary commitment addressed issues that the FTC may not have been convinced were problems.

“The lesson might be that if the FTC isn’t sure there’s a problem, but you want to get them to close the investigation, you can say you will fix [the conduct]—whether it’s a problem or not—and you can rely on it,” Gleklen says. “Where the agency really is convinced at the end of an investigation that there is a problem, I just don’t see any possibility that those kinds of issues are going to be addressed by a voluntary commitment as opposed to a real consent decree.”